Vague penalty notice under section 271(1)(c) defeats the levy when the exact charge is not specified.

A penalty under section 271(1)(c) is unsustainable where the section 274 notice does not specify whether the charge is concealment of income or furnishing inaccurate particulars. If the penalty order and appellate order proceed on different limbs, the assessee is not put to notice of the exact accusation and the initiation of penalty proceedings suffers from a jurisdictional defect. The defect is treated as fatal to the levy, so the penalty cannot be maintained and is to be deleted.

---

---

Issues: Whether a penalty under section 271(1)(c) of the Income-tax Act, 1961 could be sustained when the notice under section 274 did not specify the precise limb of default and the authorities below proceeded on different charges.

Analysis: The notice for penalty was issued without striking off either the charge of concealment of income or furnishing of inaccurate particulars of income. The penalty order proceeded on one limb, while the appellate order sustained the penalty on a different limb and also invoked Explanation 3 to section 271(1)(c). In such circumstances, the assessee was not informed of the exact accusation and the initiation of penalty proceedings suffered from a jurisdictional defect. The defect was covered by the binding view that a vague notice not specifying the exact limb under section 271(1)(c) renders the penalty proceedings unsustainable.

Conclusion: The penalty under section 271(1)(c) could not be sustained and was directed to be deleted, in favour of the assessee.

---